Look beyond the North Shore, an area synonymous with luxury, to give buyers with Champagne tastes and budgets to match the chance to stretch their homebuying dollars. More square footage and the same upscale finishes for substantially less money are available in emerging luxury markets: established neighborhoods that are beginning to offer high-end properties.

Discerning luxury buyers know what they want when they see it. Why not give them a different option in an up-and-coming area they would not find on their own, and add value to the transaction process? They might actually discover the fantastic lifestyle and sound investment they want at a price point that makes them feel even more confident about their decision.

With an abundance of luxury budgets closer to the $1 million-plus price range and comparable North Shore listings upward of $2 million, emerging markets offer an opportunity to increase sales volume. But where are these neighborhoods that didn’t offer luxury properties until now? The answer: wherever teardown and new-construction activity — the key indicators of an emerging luxury market — are taking place.

Everything to do with luxury is at an elevated level, from price point to quality and finishes. Luxury homes set the trends, according to the brother-sister team of Sophia Klopas and Jason Stratton, global real estate advisors with Jameson Sotheby’s International Realty in Chicago. They don’t feature standard, Carrara marble countertops, Klopas said; they have the elevated, Violetta version. Hardware, mirrors and other finishes, what Klopas calls the “jewelry of the house,” don’t have to equate to an astronomical price point. But those elements do elevate the property and attract buyers who might not typically consider that particular neighborhood.

Must-see markets

Klopas and Stratton direct luxury buyers seeking homes between $1 million and $1.5 million to Edison Park, Forest Glen and Norridge — neighborhoods that have the characteristics necessary to support luxury listings, like big lots, good grammar schools, and locations steps away from the Metra and Blue Line or a 12-minute drive to the city. While they don’t have great downtown areas yet, Stratton said, neighboring Edgebrook, Park Ridge and Sauganash do. “The next phase is retail, and once it starts, that’s when prices explode even more,” he noted. “That’s what happened in Bucktown in the late 1990s.”

Stratton said 80% of condominium sellers in Roscoe Village, Bucktown and Wicker Park are moving to Edison Park, Forest Glen and Norridge. There, buyers will find abundant new-construction and conversions, “chopping off the tops of ‘workers cottages,’ adding stories and pushing back.”

“Four years ago, in those three neighborhoods, you could get a nice house for $600,000 to $700,000,” Stratton said. “Now they’re all over $1 million and climbing. It has doubled.”

He credits the increase to lot sizes and finishes. “You cannot just put plain finishes in these houses and push the market,” he said. “It has to be a higher level of finish to get $1.5 million in these neighborhoods. You see in Edison Park all the fine finishes you have in Lincoln Park for half the price.”

Fine finishes like six-inch-wide-plank white oak floors, radiant heat in basements and all bathrooms, full-height cabinets, crown molding, built-in cabinets and high-end carpentry and wallpaper are all standard. Sub-Zero and Wolf appliances, aesthetics that tie it all together, and smart-home technology are also a given.

Considering that home trends and styles change about every 10 years, luxury buyers prefer to keep up with the times. Dated colors, flooring and kitchens, or interiors that are too personalized, are deal-breakers, according to Realtor Michael LaFido, the founder of Marketing Luxury Group, creator of the Luxury Listing Specialist (LUXE) designation and author of Secrets of Top Luxury Agents. “Luxury buyers tend to be a bit pickier because their time is valuable and they don’t want to live through a big remodel. And if they do, it better have an amazing location or curb appeal or something else.”

Everything old is new again

Robert Sullivan, a broker with Berkshire Hathaway HomeServices Chicago, defines emerging luxury markets as an area not considered luxury until now, with properties well into the seven figures. In the city, he said, those markets are South Kenwood and Hyde Park, areas home mostly to people associated with the University of Chicago or having children attending the University of Chicago Laboratory Schools. While both neighborhoods are lakefront communities within striking distance of downtown, they have vastly different housing markets.

For many years, the Hyde Park market was the premier market because it’s closest to UChicago’s campus. But that proximity was at a premium cost per square foot, Sullivan said. Kenwood was not as popular in recent years because it’s about a mile from campus. However, Kenwood, built at the turn of the 20th century by wealthy Chicagoans, tends to have bigger houses on larger parcels than Hyde Park does.

“Those mansions, some of which need substantial renovation, have become very popular because of their size, curb appeal and lot size,” Sullivan said. “People are now paying well between $2 million and $3 million for houses that need substantial renovation. There are people who have invested $5 million, $6 million and $7 million in them. Given what they acquired the properties for and what they have put into them, most of those houses have not yet come back on the market.”

However, Sullivan is starting to see activity at a lower price point.

“A $4 million sale in Kenwood last year broke new territory,” he said. “It was a house that was acquired and beautifully renovated 10 to 15 years ago. Kenwood is a relatively small neighborhood, but it has some amazing architecture, and people seem to have woken up to that. Properties aren’t sitting on the market; they’re moving quickly. I think the $4 million home sold in a couple of weeks.”

Hyde Park may not have the same big parcels as Kenwood, but home prices have skyrocketed in recent years, Sullivan said. “There’s nothing for sale. The lack of inventory is really problematic, especially single-family homes. There are fewer of those to begin with.”

Sullivan will soon have a $3.2 million and a $4 million-plus listing in the Hyde Park area. “A lot of people have come to see a value to neighborhoods like this on the South Side,” he said. “If you’re looking for a bigger house on a bigger piece of property, you’re not going to find it on the North Side.”

Venture west

An abundance of emerging luxury properties is available in Elmhurst, Hinsdale and Naperville, areas with the most teardown activity (20 to 50 teardowns annually) in DuPage County, LaFido noted. The same cannot be said of the North Shore, where one-off teardowns of lakefront properties in Highland Park and Winnetka sell for a “prime-time premium” of $2 million to $3 million.

“If you can buy dirt at a lower price, you can build a comparable luxury home for less,” LaFido said. “If somebody is building a home for $1 million on a $300,000 lot, they’re going to be in it for $1.3 million. But a $1 million home on an $800,000 lot, that debt to income ratio stretches some buyers’ budgets. More people can afford $1.3 million than $1.8 million.”

Good schools, train stations and hospitals make Elmhurst, Hinsdale and Naperville attractive to luxury buyers. Living near Elmhurst University and North Central College in Naperville are other key selling points.

Acceptable concessions

Before the pandemic, luxury buyers would not consider markets with schools that had poor standardized test scores. Even if they homeschooled their children or sent them to private school, those buyers considered it too big a risk resale-wise, LaFido said. But now the pendulum has swung.

Over the past four years, LaFido has sold two homes in Winfield — both record sales — that he’s convinced would not have sold pre-pandemic due to the “school situation.” But both families are sending their kids to private schools. “Because there were other high sales in that area, they felt more confident purchasing and setting a record purchase price,” LaFido said.

Condos get a makeover

Luxury doesn’t only belong in the single-family home market; it’s found in new-construction condominiums, as well. “A $1 million condo actually has the finishes of a $3 million home,” Stratton said, noting that NanaWall glass wall panels that open to an outdoor space, pot-filler faucets over oven ranges, built-in entertainment centers and other “jewelry of the house” once considered luxury are standard. “When people buy luxury, they want to walk into a house and find everything you could possibly imagine already done. In emerging markets, you have to elevate that experience to get them there.”

It’s a fact he emphasizes to his clients. “Sellers need to provide what no one else is providing to get somebody to buy a $1.5 million home where the most expensive house is $1 million,” Stratton said. “It’s creating an emerging market based on quality, finishes, lot sizes and what’s buildable. The developers and agents are creating these markets by providing an elevated product that was never in that space.”

EXPERT SOURCES

Sophia Klopas and Jason Stratton
Global Real Estate Advisors
Jameson Sotheby’s International Real Estate — Lincoln Park

Michael LaFido
Founder
Marketing Luxury Group

Robert Sullivan
Broker
Berkshire Hathaway HomeServices Chicago